Question

Video Planet (VP) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer's home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,575, sells the remote separately for $225, and offers the installation service separately for $450. The entire package sells for $2,150. Required: How much revenue would be allocated to the TV, the remote, and the installation service? (Do not round intermediate calculations.) Item Description Allocated Revenue TV Remote Installation Total revenue

Answer 1

Solution :

	Allocated Revenue
TV	$ 1,505
Remote	$ 215
Installation	$ 430
Total Revenue	$ 2,150

Working :

Since the TV, Remote and Installation Service are three seprate obligation and the prices of these are available, the price of the entire package will be allocated in the ratio of individual prices of these obligation

Value of Entire Package     = $ 2,150

Price of TV                          = $ 1,575

Price of Remote                  = $ 225

Price of Service = $ 450

	Working	Allocated Revenue
TV	[$ 2,150 / ($ 1,575 + $ 225 + $ 450)] * $ 1,575	$ 1,505
Remote	[$ 2,150 / ($ 1,575 + $ 225 + $ 450)] * $ 225	$ 215
Installation	[$ 2,150 / ($ 1,575 + $ 225 + $ 450)] * $ 450	$ 430
Total Revenue		$ 2,150

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